Manufacturing output volumes in the three months to March improved to broadly flat, which marked their highest balance since May 2019. That’s according to the CBI’s latest monthly Industrial Trends Survey.

The survey of 321 manufacturers found that output increased in eight out of 17 sub-sectors. Growth in the electronic engineering and plastic products sub-sectors was largely offset by declines in paper, printing & media and aerospace in the headline balance.

Looking ahead, manufacturers expect output to pick up rapidly over the next three months, with expectations at their strongest since August 2017.

Total orders books improved to their highest balance since April 2019, surpassing their long-run average. Export order books strengthened to broadly in line with their long-run average.

Manufacturers anticipate output price growth will accelerate quickly in the next quarter, the strongest expectations since February 2019. Additionally, firms reported inventories as being broadly adequate, which, nonetheless, was their weakest balance since December 2017.

Anna Leach, CBI Deputy chief economist, said: “It’s great to see the mood lift among manufacturers, buoyed by a jump in order books. But firms continue to grapple with higher freight costs as well as raw material shortages. Consequently, manufacturers anticipate prices to grow at a quick pace next quarter. Meanwhile, risks to growth in European markets are elevated given the slow pace of vaccine roll-out and the likelihood of further lockdowns.

“This month’s Budget gave grounds for optimism in the manufacturing sector. In particular, the super-deduction could be a real catalyst to investment plans.

“Looking ahead, the Government should remain focussed on measures to reinforce a recovery, with an eye to boosting the UK’s competitiveness over the long-term. Rapid progress in the rollout of the vaccine will be crucial in driving a recovery business confidence.”

Tom Crotty, Group Director at INEOS and Chair of the CBI Manufacturing Council, said: “The improvement in order books, and the more positive outlook for output, is a welcome boost for the sector following a difficult start to 2021.

“Nevertheless, there can be no doubt that this progress is fragile and the sector continues to operate in a challenging landscape. Container shortages and higher freight costs are causing issues with supply chains and many firms are also encountering unanticipated difficulties with the new post-Brexit trading arrangements. It’s therefore important for the government continues to support the sector through the coming critical weeks and months ahead.”

​​​​​​© John Legg